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Under the UK Climate Change Act 2008, the Prudential Regulation Authority (PRA) received an invitation from the Department for Environment, Food & Rural Affairs (Defra) to submit a Climate Change Adaptation Report as part of the second round of adaptation reporting. Given the importance of the topic and its alignment with the PRA’s objectives, in April 2014, the PRA accepted Defra’s invitation, with a focus on insurance.
On 29 September 2015, the PRA submitted its report to Defra and published the report on the PRA's website. On the same day, the Governor delivered a speech at Lloyd's of London discussing climate change, including the PRA's response to Defra (see key updates).
China, as part of its presidency of the G20, has established a new Green Finance Study Group (GFSG). China and the United
will serve as
co-chairs of the GFSG, through the People’s Bank of China and the Bank of England. The core objectives of the GFSG are to identify institutional and market barriers to environmental factors being adequately integrated into financial decision
making, and to review options on how to enhance the ability of the global financial system to mobilis
e private capital for green investment.
The first GFSG meeting was held in Beijing, from 25-26 January 2016, see press release
On 30 September 2015, Sam Woods (Executive Director of Insurance Supervision) published a letter for PRA-regulated insurers and other industry participants notifying them of the PRA’s response to Defra and the opportunity to provide technical comments by Friday 30 October.
On 29 September 2015, the PRA submitted its report to Defra and published the report on the PRA’s website. On the same day, the Governor delivered a speech at Lloyd’s of London discussing climate change, including the PRA’s response to Defra.
The PRA is participating in a series of roundtables during 2015 being facilitated by the University of Cambridge Institute for Sustainability Leadership and ClimateWise. The roundtable discussions bring together key insurance leaders, experts and academics and focus on the risks posed by climate change to the insurance industry. Further information on the roundtables and summaries of the discussions are available on the Cambridge Institute for Sustainability Leadership’s website.
Cambridge Institute for Sustainability Leadership’s website
On 30 October 2014 Mark Carney wrote a letter of response to the Environmental Audit Committee (EAC) regarding the PRA’s Climate Change Adaptation Report and wider work on stranded assets.
On 16 October 2014, the Environmental Audit Committee (EAC) sent a letter regarding stranded assets following press coverage of comments made by Mark Carney, Governor of the Bank of England, at a World Bank forum in Washington on 10 October 2014.
On 17 July 2014, the EAC responded to Mark Carney’s letter of 8 July 2014.
On 8 July 2014, Mark Carney wrote a letter in response to the EAC’s Twelfth Report on Green Finance, which recommended that “the Financial Policy Committee of the Bank of England should regularly consult with the Committee on Climate Change to help it monitor the risks to financial stability associated with a carbon bubble”. In the letter Governor Carney references the previous correspondence from February 2012 and refers to the PRA’s climate change adaptation reporting project.
In June 2014 the PRA wrote to various insurance firms to request their voluntary participation in a climate change adaptation survey, to inform our climate change adaptation report in response to Defra.
PRA Adaptation Reporting letter June 2014
In December 2013 the Department for Environment, Food and Rural Affairs invited the PRA to participate in the second round of Adaptation Reporting on a voluntary basis. The PRA formally accepted in April 2014.
In January 2012 a coalition of investors, NGOs and universities wrote to the Bank of England to request that it investigate how Britain’s exposure to polluting and environmentally damaging investments might pose a systemic risk to the UK financial system and prospects for long term economic growth.
In February 2012, Governor Mervyn King responded to the aforementioned letter. In his response he outlined three conditions that needed to be met to consider carbon-intensive investment as being a threat to financial stability.
Both letters, which were previously available on the Climate Change Capital website, are now available on the Smith School of Enterprise and the Environment website. To help readers, direct links to these letters are below.
January 2012 letter from a coalition of investors, NGOs and universities to the Bank of England
February 2012 response from the FPC